Amended in Senate April 22, 2014

Senate BillNo. 1011


Introduced by Senator Monning

February 13, 2014


An act to amend Section 5005.1 of the Corporations Code, relating to corporations.

LEGISLATIVE COUNSEL’S DIGEST

SB 1011, as amended, Monning. Nonprofit corporations: self-insurance.

The Nonprofit Corporation Law authorizes certain nonprofit corporations that are organized chiefly to provide health or human services, other than hospitals, to establish an insurance pool to self-insure against various risks, including, among others, tort liability and any loss arising from physical damage to motor vehicles owned or operated by the nonprofit corporation.begin insert The pooling arrangement is not considered insurance nor is it subject to regulation under the insurance laws of this state.end insert

This bill would extend these provisions to authorize the establishment of an insurance pool to self-insure against the loss or damage to property of every kind, including, but not limited to, losses and expenses related to the loss of property.begin insert The bill would require that all corporations participating in a pooling arrangement established under these provisions be given written notice that the pool is not regulated by the Insurance Commissioner and that the state insurance insolvency guaranty funds are not available to safeguard its risk.end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 5005.1 of the Corporations Code is
2amended to read:

3

5005.1.  

(a) Except for a liabilitybegin delete whichend deletebegin insert thatend insert may be insured
4against pursuant to Division 4 (commencing with Section 3200)
5of the Labor Code, an authorized corporation may do any of the
6following:

7(1) Insure itself against all or any part of any tort liability.

8(2) Insure any employee of the corporation against all or any
9part of his or her liability for injury resulting from an act or
10omission in the scope of employment.

11(3) Insure any board member, officer, or volunteer of the
12corporation against any liability that may arise from any act or
13omission in the scope of participation with the corporation.

14(4) Insure itself against any loss arising from physical damage
15to motor vehicles owned or operated by the corporation.

16(5) Insure itself against the loss or damage to property of every
17kind, including, but not limited to, losses and expenses related to
18the loss of property.

19(b) begin insert(1)end insertbegin insertend insert The insurance authorized pursuant to this section shall
20only be available to an authorized corporation where that
21corporation has joined with two or more other authorized
22corporations in an arrangement providing for the pooling of
23self-insured claims or losses. The pooling arrangement shall not
24be considered insurance nor be subject to regulation under the
25Insurance Code.

begin insert

26(2) All corporations participating in a pooling arrangement
27established pursuant to this section shall be given written notice
28that the pool is not regulated by the Insurance Commissioner and
29that the state insurance insolvency guaranty funds are not available
30to safeguard its risk.

end insert

31(c) begin deleteNothing in this end deletebegin insertThis end insertsectionbegin delete shall be construed toend deletebegin insert does notend insert
32 authorize a corporation organized pursuant to this division to pay
33for, or to insure, contract, or provide for payment for, any part of
34a claim or judgment against an employee of the corporation for
35punitive or exemplary damages.

36(d) Any insurance pool established pursuant to this section shall
37have initial pooled resources of not less than two hundred fifty
38thousand dollars ($250,000).

P3    1(e) All participating corporations in any pool established
2pursuant to this sectionbegin delete mustend deletebegin insert are required toend insert agree to pay premiums
3or make other mandatory financial contributions or commitments
4necessary to ensure a financially sound risk pool.

5(f) For the purpose of this section, an authorized “corporation”
6means any corporation that meets all of the following criteria:

7(1) Is organized chiefly to provide or fund health or human
8services, but does not include a hospital.

9(2) Is exempt from federal income taxation as an organization
10described in Section 501(c)(3) of the United States Internal
11Revenue Code.



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